Lenexa, KS-based BATS Global Markets has agreed to acquire KCG Hotspot FX for $365 million in cash. Hotspot FX is a leading player in the foreign exchange market. The company primarily works with banks, market makers, hedge funds and institutions. The average daily volumes at Hotspot have totaled to above $30 billion throughout the second half of 2014. January 2015 is on track to be the company’s best month ever.
BATS is one of the largest US equity securities and options exchanges. Operating the BZX and BYX exchanges, the company holds more than 10% of the US equity market. BATS' Chi-X Europe equity options exchange is a leading exchange in Europe, trading in 25 European indices with more than 20% of the market. Since the company owns and operates the technology at the core of its trading systems, it sees its technological expertise as the differentiating factor for its business. BATS was formed in 2005 as an alternative to NYSE; it withdrew its IPO in 2012. The merger between BATS and Direct Edge Holdings in 2013 made it the second-largest U.S. stock exchange, just behind NYSE.
The acquisition will allow BATS to foray into electronic foreign exchange trading, assisting in its strategy to diversify its business.
In addition to the cash price, the deal includes sharing of certain tax benefits between the companies, which could save up to $70 million over a three-year period.